The jobless rate is down. The stock market is up. Inflation is low. The Fed is stimulating the economy through quantitative easing. The recovery is picking up steam.

Such daily feel-good headlines, created by the Obama administration and amplified by the press, glide pleasantly over our minds and reassure us all is well, or soon will be. But what do these headlines actually have to do with reality?

Often very little. The establishment media’s financial reporting is just like their reporting on politics and culture – which is to say, biased, inaccurate and misleading, sometimes intentionally so.

In fact, a great deal of what passes for “objective reporting” on the economy is little more than “laundered” press releases from the government (and other power players like the Federal Reserve) whose credibility depends on continually deceiving the public.

So, what are the government, the Fed and their media cheerleaders hiding?

Let’s begin with the unemployment rate.

A month before Election Day, the government’s official unemployment rate, after close to four years above 8 percent, surprised everyone by magically breaking through the psychological 8 percent floor with a September “jobless rate” of 7.8 percent. This welcome news was hailed by the Obama administration and its media acolytes as proof the president’s controversial spending and regulatory policies were indeed working to heal a troubled economy.

Real-estate billionaire Donald Trump agreed with Welch: “He’s 100 percent correct, in terms of his statement about jobs. And after the election they’ll do a big correction.”

Added Home Depot co-founder Ken Langone: “I give Jack a lot of credit for being there and standing out. It makes it easier for me because he and I share the same point of view. These numbers don’t square with what’s going on with the economy.”

The White House shot back at the skeptics, with Labor Secretary Hilda Solis protesting, “This is a methodology that’s been used for decades. And it is insulting when you hear people just cavalierly say that somehow we’re manipulating numbers.”

OK, time out. Amid all the bickering over whether the “official” unemployment rate is 8.1 percent or 7.8 percent, it’s easy to forget that all these numbers are just a fairy tale created by the government and promoted by the elite media.

As the Washington Post reported, Paul, a popular but long-shot GOP presidential candidate during the primary season, “has long argued that the unemployment figures released by the Bureau of Labor Statistics are inaccurate and that the country has actually been in a depression for the past decade.”

Said Paul: “If you want to really know why the American people feel badly about the economy, it’s that the unemployment rate is escalating. It’s very high. But if you take … the number of people employed, 132 million people, it’s the same number that was employed in the year 2000. There have been no new jobs produced.”

And how does the government arrive at only 8 percent unemployment? Easy, just leave out lots of unemployed people from the calculations.

Let’s break it down. According to the Bureau of Labor Statistics, “In September, 2.5 million persons were marginally attached to the labor force.” Even though these individuals “wanted and were available for work, and had looked for a job sometime in the prior 12 months … they were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.” In case you missed that: The government is openly admitting that 2.5 million unemployed Americans were not counted as officially “unemployed.”

That’s just for starters. The government’s “official” unemployment stats also don’t include part-time workers who want and need full-time work. As the PolicyMic.com blog summarized, the Bureau of Labor Statistics’ 7.8 percent figure “does not include unemployed members of the workforce who are not actively looking for work; nor does it factor in workers with part-time jobs who are seeking full-time employment. When these workers are included, the (U-6) un/underemployment rate for September remained at 14.7 percent as it had been in August.”

In an article titled “The Real Unemployment Rate,” Fox Business News analyst Elizabeth MacDonald does the math and arrives at virtually the same number: 14.5 percent unemployment.

And Mortimer Zuckerman, U.S. News & World Report’s editor in chief, writes: “Given that the median period of unemployment is now in the range of five months, vast numbers who want to work are just not counted. If we include, as we should, people who have applied for a job in the last 12 months, and those employed part time who want full-time work, the real unemployment number is closer to 15 percent.”

In short, America’s actual unemployment rate is almost double the “official” fairy-tale number.

“Forget the modest 3.1 percent rise in the Consumer Price Index, the government’s widely used measure of inflation,” the article began. “Everyday prices are up some 8 percent over the past year, according to the American Institute for Economic Research.”

The not-for-profit research group measures inflation, not by the academic theories preferred by government economists, but by focusing on Americans’ daily purchases of food, gasoline, prescription drugs, phone service, television programming and all the other things most people actually buy on a regular basis.

The group’s index measures the real-world impact of price increases, particularly for people living on a tight budget. Thus, reported CBS, “largely as the result of the recent run-up in gas prices, this ‘everyday price index’ (EPI) suggests that Americans are being pinched far more tightly than the official inflation measure would have you believe.”

Indeed, most people are astonished to learn the government excludes from its “cost of living” calculations food and gasoline – both necessities of life and both skyrocketing in price. How, they wonder, can the most necessary of all household purchases be left out of the calculation? Bloomberg Television commentator and equities analyst Barry Ritholtz humorously sums up the government’s game: “If you take everything out of the CPI basket that’s going up in price, sure, you have no inflation!”

Just as with unemployment, the government’s under-reporting of inflation is no accident, notes economist John Williams, who exposes the government’s deceptive inflation and other financial statistics on his popular website, ShadowStats.

The consumer price index, or CPI, is the broadest measure of consumer price inflation for goods and services published by the Bureau of Labor Statistics. Currently it is hovering around 2-3 percent, according to the government’s official reckoning. However, charges Williams, to keep the “official” inflation rate as low as possible, the government has actually redefined the way it calculates inflation at least twice in recent decades.

ShadowStats uses the government’s own statistics, as well as the formulas it formerly employed for calculating key indicators, to show what the current inflation rate would be if calculated as it was a few years ago.

“In 30 years as a private consulting economist,” said Williams, “I have noted a growing gap between government reporting of inflation, as measured by the consumer price index, and the perceptions of inflation held by the general public. It has been my experience that the general public believes inflation is running well above official reporting, and that the public’s perceptions tend to mirror the inflation experience that once was reflected in the government’s CPI reporting.”

This growing difference between public perception and the government’s “official” inflation rate, explained Williams, “primarily is due to changes made over decades as to how the CPI is calculated and defined by the government. Specifically, changes made to the definition of CPI methodologies in recent decades have reflected theoretical constructs offered by academia that have little relevance to the real-world use of the CPI by the general public. Importantly, these changes generally are not understood by the public.”

Putting it even more candidly, Williams said, “the reporting system increasingly succumbed to pressures from miscreant politicians, who were and are intent upon stealing income from Social Security recipients without ever taking the issue of reduced entitlement payments before the public or Congress for approval.”

Courtesy of ShadowStats.com

The top consumer price index chart reflects ShadowStats’ estimate of real inflation for today, using the government’s own numbers, but calculating the CPI the way the government did it in 1990.

Courtesy of ShadowStats.com

The second chart is today’s CPI calculated using the government’s methodologies in place in 1980.

Why does the consumer price index matter anyway, and why would the government want the CPI to be as low as possible, regardless of the economic realities facing Americans?

Payouts on inflation-protected investments like TIPS (Treasury Inflation-Protected Securities) and Series I bonds are indexed directly to the CPI.

Social Security payments, pensions and inflation-indexed annuities all rely on CPI data to determine their annual adjustments.

The size of individual income tax brackets, personal exemptions and the standard deduction are tied to movements in the CPI.

Low inflation numbers (especially when they are much less than GDP growth) make the economy seem healthy.

So, how did government change the definition of inflation? Once upon a time, determining consumer inflation was accomplished by measuring the cost of maintaining a constant standard of living, as measured by a “fixed basket of goods” that everybody needed and purchased. Makes sense, right?

“Maintaining a constant standard of living, however, is a concept not popular in current economic literature,” said Williams, “and certainly not within the thinking or the lexicon of the Bureau of Labor Statistics, the government’s statistical agency that estimates and reports on consumer inflation.”

The old CPI concept of measuring the changing costs of maintaining a constant standard of living by tracking the costs of a fixed basket of goods and services was how government estimated inflation “going back to at least the 1700s,” said Williams, “and prior to 1945, the fixed-basket CPI tracked by the U.S. government actually was known as the Cost of Living Index.”

But during the first half of the 20th century, academics came up with a brand-new concept – that of a “constant level of satisfaction” – to gauge the “true cost of living.” Thus, if people were willing to substitute less expensive goods – like hamburger in place of the steak they previously ate – the academics’ argument was that consumers would be OK with the substitution and that no reportable price inflation would therefore have occurred even though steak became so expensive people bought hamburger instead.

To the average person, such reasoning is both absurd and dishonest.

In reality, “maintaining a constant standard of living means being able to consume the same goods in the same quantity, without having to trade-off living quality versus price,” observed Williams.

Thus, during the Clinton era, politicians got their wish and the CPI was recalculated to bring the percentage rate down. Williams revisits the history:

In the early-1990s, political Washington moved to change the nature of the CPI. The contention was that the CPI overstated inflation (it did not allow substitution of less-expensive hamburger for more-expensive steak). Both sides of the aisle and the financial media touted the benefits of a “more-accurate” CPI, one that would allow the substitution of goods and services.

The plan was to reduce cost-of-living adjustments for government payments to Social Security recipients, etc. The cuts in reported inflation were an effort to reduce the federal deficit without anyone in Congress having to do the politically impossible: to vote against Social Security. The changes afoot were publicized, albeit under the cover of academic theories. Few in the public paid any attention.

One who paid a great deal of attention is Ron Paul. Earlier this year, he confronted Ben Bernanke during the Fed chairman’s testimony before the House Financial Services Committee, on which Paul sits:

“This argument that the prices are going up about 2 percent,” Paul told Bernanke, “Nobody believes it. You know, and the old CPI says prices are going up by 9 percent, so they believe this. People on fixed incomes, they’re really hurting. The middle class is really hurting because their inflation rate is very much higher than the government tries to tell them. And that’s why they lose trust in government.”

Malignant money

Why does the U.S. government engage in blatant, continual deception regarding the true state of the economy?

The truth is, such statistical duplicity by the government and its media handmaidens, shameful as it is, is relatively minor compared to the truly terrible thing the U.S. government has done to America’s monetary system.

Consider: Most Americans today recognize that the federal government has become a gigantic, malignant cancer. That’s barely a metaphor – government literally has become a parasitic growth on a once-healthy body politic, drawing substance and energy from it, ravaging the healthy “cells” (productive individuals, families and businesses) in order to feed a malignancy so ravenous it threatens the very life of the “host organism,” America.

But all this could not have happened without the “food” of fiat money.

There was a time when the nation had an honest, constitutional monetary system backed by gold and silver. (“No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts,” says Article 1, Section 10 of the U.S. Constitution.) This, all by itself, constituted a massive barrier to the unrestrained growth of government, since one cannot create gold or silver with a printing press.

All that changed in 1913, when under the presidential leadership of progressive Democrat Woodrow Wilson, Congress passed the Federal Reserve Act. Pushed through on Dec. 23, the night before Christmas Eve, and largely along party lines (only two House Democrats voted nay and none did so in the Senate), Wilson immediately signed it into law.

This was a blatant violation of the Constitution, which specifies in Article I, Section 8 that “The Congress” – not some private banking cartel – “shall have Power … To coin Money, [and] regulate the Value thereof.” From that point, it was all downhill.

For the next two decades, until 1933, Federal Reserve notes were still redeemable in gold and silver, until President Franklin Delano Roosevelt outlawed private ownership of gold. Between then and 1963, all Federal Reserve notes were redeemable in “lawful money,” which by then meant only silver.

As author W. Cleon Skouson explains in “The Making of America,” the nation’s money – once considered “as good as gold” – continued on its path of gradual degradation:

In 1965, President Lyndon Johnson authorized the Treasury to begin issuing debased “sandwich” dimes and quarters with little or no intrinsic value, and the quantity of silver in fifty-cent pieces was reduced to 40 percent.

On June 24, 1968, President Johnson issued a proclamation that henceforth Federal Reserve silver certificates were merely fiat legal tender and could not be redeemed in silver.

By August 1971, many of the European countries had collected so many billions in Eurodollars (foreign aid, money spent by the U.S. military abroad, etc.) that European banks had begun to get nervous about redeeming their money in gold. A threatened run on the U.S. Treasury resulted in the American gold window being slammed shut. This resulted in collapse of the dollar on the world market. Since then it has fluctuated on the world market like any other commodity, since it is no longer redeemable in precious metal and therefore has no intrinsic value.

In 1973, the U.S. dollar was officially devalued, changing the price of gold from $35 per ounce to $42.23 per ounce.

On March 16, 1973, Congress set the American dollar completely afloat with nothing to back it up but the declaration of the government that it was “legal tender,” or fiat currency. The world market immediately reflected serious erosion in the value of the American dollar.

Hit the pause button. Let’s take a moment to understand what Nixon really accomplished in his disastrous effort – which, by the way, was supposed to be only “temporary” – to protect America’s gold reserves from a European run on the U.S. Treasury.

In “Nixon’s Colossal Monetary Error,” Forbes columnist Charles Kadlec explained that “breaking the solemn promise that a dollar was worth 1/35th of an ounce of gold doomed his presidency, and marked the beginning of the worst 40 years in American economic history.”

Nixon’s ill-fated 1971 promises to the nation, made with great ceremony from the Oval Office, wrote Kadlec, “were profound and reflected the received wisdom of that day and today”:

Unshackling the U.S. government from the requirement of maintaining the dollar’s value in terms of gold would empower able men and women at the Federal Reserve to use monetary policy to increase the general prosperity of the American people.

Domestically, we were promised that the manipulation of quantity and value of a paper dollar would avoid costly recessions, provide high employment, and produce strong economic growth. Internationally, we were promised that the devaluation of the dollar would reduce our trade deficit and improve the international competitiveness of American workers and businesses. And, because trade was only one-tenth of the U.S. economy, all of this could be done while maintaining price stability.

Each and every one of these promises has been broken.

Indeed, ever since Nixon ended the gold standard, unemployment has surged and the nation has suffered the three worst recessions since the end of World War II. This compares disastrously to the post-World War II gold-standard era between 1947 and 1970, Kadlec explains:

Since able men and women were given the power to manipulate the quantity and value of the dollar, real economic growth has averaged 2.9 percent a year – more than a full percentage point slower than the 4 percent growth rate during the post-World War II gold-standard era.

A 1 percent difference may not seem like much, but in reality it is the difference between prosperity and austerity. A growth rate of 3 percent creates just enough jobs for all new workers. A growth rate of 4 percent yields higher employment and a decline in the unemployment rate.

Worst of all, writes Kadlec, the U.S. dollar has fallen disastrously in value: “Today, the dollar is worth less than two dimes in buying power compared to the pre-Nixon dollar. And, with little reason to believe that the dollar will maintain even this paltry value, the average American family is left with no meaningful way to save for their children’s education or their own retirement. We experience all of this in the form of financial insecurity and well-grounded anxiety about the future.”

The ultimate wealth-redistribution engine

America is burdened today with the twin curses of a corrupt, out-of-control government and a corrupt, unaccountable monetary and banking system, each enabling the other in symbiotic fashion. The government needs a central banking system willing and able to create gargantuan amounts of money out of nothing, “lending” it to the government through various schemes, enabling it to grow uncontrollably, while inflating the currency and thereby stealing citizens’ wealth through constant dollar devaluation. President Reagan warned about this when he said, “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”

This mutual arrangement between government and the central bank, in turn, awards huge power, wealth and influence to an unaccountable private banking cartel – deceptively labeled “Federal” even though it is not part of the government. The bank bailouts of recent years prove that the Fed, its secret stockholders, and the entire banking establishment have become “too big to fail,” their downside risk always borne by taxpayers, while the massive upside benefit accrues to them alone.

The manner in which the Fed operates – how it issues fiat money only through creating debt, then charges interest on what are nothing more than computer entries, and intentionally promotes inflation (2 percent per year is the Fed’s current “target rate”), which steals a major portion of Americans’ wealth every generation – has been rendered needlessly complex and labyrinthine so as to shield these predatory and unconstitutional practices from public comprehension.

Small wonder that today’s bipartisan congressional calls to audit the Fed are met with refusals and thinly veiled threats from its current chairman, Ben Bernanke.

Bottom line: A corrupt banking system has become the handmaiden, the primary enabler – the “crack dealer,” so to speak – of an out-of-control government addicted to spending. Unfortunately, the long-term result of this is the destruction of the productive middle class, which is the source of the wealth government is so obsessed with redistributing.

This is why many enlightened monetary historians advise Americans to free themselves from “the matrix” of fiat currency by owning precious metals, which have served as “real money” the world over for the past 5,000 years. The greater the number of citizens that make a point of owning some gold and/or silver, they say, as opposed to exclusively paper assets, the better chance the great middle class has of surviving the future with most of its wealth intact. Anticipating that government will be forced to radically inflate the currency to pay its debts, one analyst, Mike Maloney, advises Americans to prepare individually for “the greatest wealth transfer in history” in the next few years.

Remember, today’s “dollar bill” purchases what 3 cents would buy in 1913 when the Federal Reserve was created to “stabilize” our money system.

So where do we go from here?

Things are quite a bit worse than most people realize, economically. The world is abandoning the increasingly unreliable U.S. dollar as its reserve currency. America’s credit has been downgraded and faces further threatened downgrades. The national debt of over $16 trillion, when added to government’s future liabilities that some peg at $200 trillion, simply cannot be paid. If nothing changes, America’s children will grow up inheriting national insolvency and huge personal financial burdens of our making.

There are really only a few possible answers:

1. Continue to put off the day of reckoning by borrowing much more money from adversary nations like China (but they too are facing economic chaos). That’s obviously not the right choice.

2. Raise taxes dramatically in the middle of a prolonged recession. That’s also a bad idea.

3. Get the Federal Reserve to create mountains of new money out of thin air and use it to pay our debtors with worthless dollars. That could be accomplished very quickly, but it would mean saddling Americans with ruinous hyperinflation and wiping out the accumulated wealth and savings of the whole country.

None of these solutions have a happy ending.

Oh wait, there is one more possibility.

4. Face the music, stop “kicking the can down the road,” ignore the perverse “mainstream media” and legions of spoiled crybabies addicted to government freebies and set about the difficult but noble and ultimately liberating task of cutting government back to its constitutionally authorized size. Especially, abolish the Federal Reserve and return the power of creating money to Congress, reinstate the gold standard and eliminate many of the enormous, parasitic, unconstitutional bureaucracies that fill the nation’s capital.

If we do this, if we finally repudiate the “fairy tale economy,” and once again embrace wholeheartedly the founding legal, economic, cultural and spiritual principles that made America the greatest nation on earth, then we will bequeath to our children a nation in which they truly can live happily ever after.